Author - Mrunmayee Jogalekar

  • Mrunmayee Jogalekar
17 Dec

Goal is to get back to the FY18-19 growth levels– LTTS

Update on the Indian Equity Market:

On Wednesday, Nifty closed 0.9% higher at 13,692. Within NIFTY50, HINDALCO (+2.8%), BHARTIARTL (+2.8%), and HDFC (+2.8%) were the top gainers, while ICICIBANK (-1.1%), INDUSINDBK(-1.0%), and ULTRACEMCO (-0.8%) were the top losing stocks. Among the sectoral indices, REALTY (+5.1%),METAL (+1.8%) and AUTO (+1.0%) were the top gainerswhilePSU BANK (-1.6%) was the only losing sector.

Goal is to get back to the FY18-19 growth levels– LTTS

Excerpts of an interview with Mr. Keshab Panda, CEO, L&T Tech Services, aired on CNBC-TV18 on 15thDecember 2020
● The new normal is presenting new opportunities for engineering and technology companies like L&T Tech Services (LTTS).
● LTTS recently received a USD 100 mn + plant engineering order from a global oil and gas major. The deal is the biggest ever plant engineering deal in India and includes sustenance engineering, control automation, smart manufacturing, and efficiency improvement.
● The revenue contribution of the deal will start coming in FY22E onward.
● The current deal is for 2 plants of the client. The opportunity could be much more than that if extended to other plants. The opportunity in the 2 plants itself could extend by 50-100%.
● For this deal, the model will be 20% onsite and 80% offshore.
● The deal wins pipeline has increased multifold from the pre-covid levels.
● The revenue growth for FY18 and FY19 was 20% and 26% respectively. Growth came down to 8%-9% in FY20 due to customer issue. Now the goal is to get back to the FY18-19 growth levels quickly.
● LTTS is also working on improving margins from the 2QFY21 levels.
● Among sectors that LTTS operates in, plant engineering is doing well, medical is doing best, transportation except aerospace is also coming back.

Consensus Estimate (Source: market screener website)
● The closing price of LTTS was ₹ 1844 as of 16-December-2020. It traded at 30x/ 23 x/ 20x the consensus EPS estimate of ₹ 62.6/80.5/92.4 for FY21E/ FY22E/ FY23E respectively.
● The consensus target price of ₹ 1750/- implies a PE multiple of 19x on FY23E EPS of ₹92.4/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By IT, LTTS 0 Comments Read more...
09 Dec

JLR will not compromise on product and technology investments – Tata Motors

Update on the Indian Equity Market:

On Tuesday, Nifty closed 0.3% higher at 13,393. Within NIFTY50, ULTRACEMCO (+3.1%), TCS (+2.1%), and RELIANCE (+1.8%) were the top gainers, while HINDALCO (-2.3%), SUNPHARMA (-2.2%), and COALINDIA (-1.8%) were the top losing stocks. Among the sectoral indices, PSU BANK (+7.1%), REALTY (+0.8%) and IT (+0.8%) were the top gainers while METAL (-1.2%), PHARMA (-1.2%), and MEDIA (-0.9%) were the top losing sectors.

Excerpts of an interview with Mr. PB Balaji, Group CFO, Tata Motors, aired on CNBC-TV18 on 7th December 2020
● Management has consciously called out that turning free cash flow positive is a key objective of the business.
● Both JLR and TML will be free cash flow positive in 2HFY21E. The India PV business will turn positive from FY23E. The management is confident of delivering on these targets.
● JLR turnover was well underway before the Covid-19 disruption. Due to Covid-19, JLR has accelerated plans that were already in place.
● Turnaround of JLR depends on 3 verticals: 1) Focus on how to use the products that have been launched to their maximum limit, 2) China geography turnaround, and 3) Cost and cash savings as part of the Charge+ program. As these 3 factors come together, JLR will turn free cash positive and that will ensure deleverage.
● Land Rover has been doing better than Jaguar. Land Rover also generates most of the profits currently. Turnaround and sustainability of cash flows of Jaguar is part of the overall medium-long term JLR turnaround plan.
● On the Indian PV side, the New forever range launched by TML in February 2020 has been successful in generating demand traction. Overall, the industry is seeing a demand resurgence in PV led to a need for a safe commute. Post-Diwali this year there hasn’t been a serious decline in sales which is what happens normally. Order books are at all-time highs.
● The Indian CV business is also seeing sequential recovery, although slower than PV. Recovery came earlier in SCVs and ILCVs.
● MHCVs are also doing better in the last 1.5 months. Financing has opened up for MHCVs which is helping sales. With the economy slowly starting, there is a pick-up in cargo movements.
● One segment that is not performing well at all is the Passenger carriers (buses) segment due to schools being shut and most offices working from home.
● JLR has slashed FY21E capex plans to GBP 2.5 bn. But JLR will not compromise on product and technology investments. The capex cut is in tune reflecting the decline in the demand scenario. Some products whose business case was not strong enough have been put on pause.
● Every JLR product will have an electrification option by early FY22E. The electrification journey is well underway and is not stopping here.
● Additionally, Tata Motors is looking for partnerships – be in JLR or TML – to ensure capital productivity.
● JLR margins went up to 11.1% in 2QFY21 on the back of Charge+ cash savings. Management expects further improvement in profitability and cash flows in 2HFY21E. As volumes increase, initiatives made on the costs, especially material costs, will get reflected more.

Consensus Estimate (Source: market screener website)
● The closing price of TATAMOTORS was ₹ 182 as of 8-December-2020. It traded at 18 x/ 9x the consensus EPS estimate of ₹ 10.4/19.9 for FY22E/ FY23E respectively.
● The consensus target price of ₹ 148/- implies a PE multiple of 8x on FY23E EPS of ₹19.9/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Auto, Tata Motors , 0 Comments Read more...
01 Dec

Any new Government scheme is welcomed as it expands the market– SBI Life Insurance

Update on the Indian Equity Market:

On Friday, Nifty closed 0.1% lower at 12,969. Within NIFTY50, TATAMOTORS (+2.8%), ASIANPAINT (+2.0%), and HEROMOTOCO (+2.0%) were the top gainers, while NESTLEIND (-4.3%), POWERGRID (-3.2%), and JSWSTEEL (-2.6%) were the top losing stocks. Among the sectoral indices, REALTY (+2.7%), MEDIA (+1.5%), and AUTO (+1.4%) were the top gainers while IT (-0.4%) was the only losing sector.

Any new Government scheme is welcomed as it expands the market– SBI Life Insurance

Excerpts of an interview with Mr. Mahesh Kumar Sharma, MD & CEO, SBI Life, aired on CNBC-TV19 on 27th November 2020
● The growth trend for SBI Life remains healthy. Management is seeing numbers similar to last year and things are panning out as per internal targets.
● SBI Life did well in October even though the growth was lower than peers. Some areas like ULIPs are seeing improvement and Protection segment growth has been very strong.
● 1QFY21 was weak due to strict lockdowns. SBI Life like its peers had to jump from physical one-to-one selling to digital selling in the least possible time. Management is seeing a month-on-month improvement since June. They expect growth to continue in 2HFY21. Generally, for life insurance companies, 1HFY has lower seasonality and 2HFY is seasonally stronger.
● SBI Life has seen some increase in Covid-19 claims but the quantum is not worrying.
● Demand for risk products is higher from September. Credit life has grown in low double digits since September. Management expects this growth to continue on the back of strong growth in credit offtake.
● SBI Life is seeing YoY growth in ULIPs on the back of picking up of the market, improvement in sentiments easing of lockdowns.
● SBI Life has already repriced products that have an interest rate guarantee to adjust for a drop in interest rates. They continue to reprice products where needed.
● SBI Life has a lot of customers on the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY). The government has been talking about Saral Bima Yojana. Management thinks that any new scheme is welcomed as it increases the market and penetration. And if everyone takes insurance, it is going to be a very profitable business.

Consensus Estimate (Source: investing.com and market screener websites)
● The closing price of SBILIFE was ₹ 849/- as of 27-November-2020. It traded at 55x/ 47x/ 39x the consensus EPS estimate of ₹ 15.3/18.2/21.8 for FY21E/ FY22E/ FY23E respectively.
● The consensus target price of ₹ 967/- implies a PE multiple of 44x on FY23E EPS of ₹21.8/-.
● In the case of insurance companies, the embedded value per share is the correct multiple for valuing the company. The consensus estimate of this metric is not available on any of the websites.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Insurance, SBI Life Insurance, Uncategorized 0 Comments Read more...
20 Nov

Footfalls improving every month– Phoenix Mills

Update on the Indian Equity Market:

On Thursday, Nifty closed 1.3% lower at 12,772. Within NIFTY50, POWERGRID (+2.6%), ITC (+2.2%), and NTPC (+1.7%) were the top gainers, while SBIN (-5.0%), ICICIBANK (-4.2%), and AXISBANK (-4.1%) were the top losing stocks. Among the sectoral indices, FMCG (+0.4%), and MEDIA (+0.3%) were the only gainerswhilePSU BANK (-3.1%), BANK (-2.9%), and PRIVATE BANK (-2.6%) were the toplosing sectors.

Footfalls improving every month– Phoenix Mills

Excerpts of an interview with Mr. Shishir Shrivastava, MD, Phoenix Mills, aired on CNBC-TV19 on 18thNovember 2020
● Average footfalls for October and November have reached 55%. Footfalls were higher in the first 2 weeks of November. Consumption, especially in the first 2 weeks of November has been 104% of last year. This means that conversion rates have gone up, i.e more people entering the mall are actually buying/consuming.
● 2QFY21 revenue was down 48% YoY as retail stores and hotels were not operational. But Phoenix Mills is seeing very good pick up now. Management expects FY21 to end at 58% of FY20’s rental income.
● Phoenix Mills has concluded negotiations with bank partners and have absolute visibility on how cash flows will pan out.
● Any discounts and waivers given by Phoenix Mills for the period of shutdown and the period after unlocking will end by the close of FY21. FY22 rentals will be close to what was recorded in FY20.
● When malls opened in August, footfalls were 25% which has increased to 55% now. So the trend is encouraging. People are being careful leading to still subdued footfalls. Phoenix Mills are also regulating the people density in their properties.
● Every month footfalls are improving 25-30%. Management hopes that they should be close to 75-80% of footfalls by 4QFY21. That being said, the important metric of consumption is tracking very well.
● All of Phoenix Mills’ expansion projects are well underway. They opened a new 1 mn sq ft. mall in Lucknow in July 2020 which is performing well. There are some delays on account of shortage of manpower but they are largely on track with expansion projects.
● Under construction projects of Phoenix Mills were funded by equity and there was no draw down of debt- which continues.
● Phoenix Mills have lease rental discounted debt on the operational assets. The moratorium has helped and now as cash flows are improving, management has visibility that they will be able to service all debt obligations by 3QFY21. This also includes amounts to be paid for deferment of moratorium.
● Phoenix Mills has around Rs 45,000 mn gross debt, and aroundRs 18,500mn cash on book. As free cash flow keeps improving, net debt levels can come down further.

Consensus Estimate (Source: market screener website)
● The closing price of PHOENIXLTD was ₹ 645/- as of 19-November-2020. It traded at 215x/ 33 x/ 25x the consensus EPS estimate of ₹ 3.0/19.8/26.2 for FY21E/ FY22E/ FY23E respectively.
● The consensus target price of ₹ 732/- implies a PE multiple of 28x on FY23E EPS of ₹26.2/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Diversified, Phoenix Mills, Uncategorized 0 Comments Read more...
11 Nov

Strong 2QFY21 performance, expect 2HFY21 to better – Emami

Update on the Indian Equity Market:

On Tuesday, Nifty closed 1.4% higher at 12,631. Within NIFTY50, BAJFINANCE (+8.9%), INDUSINDBK (+7.3%), and LT (+6.9%) were the top gainers, while TECHM (-5.7%), CIPLA (-5.4%), and HCLTECH (-5.0%) were the top losing stocks. Among the sectoral indices, FINANCIAL SERVICES (+4.1%), BANK (+3.9%), and PRIVATE BANK (+3.7%) were the top gainerswhilePHARMA (-4.3%), and IT (-3.9%) were the only losing sectors.

Strong 2QFY21 performance, expect 2HFY21 to better – Emami

Excerpts of an interview with Mr. N H Bhansali, CEO-Finance& CEO, Emami, aired on CNBC-TV19 on 9thNovember 2020
● In 2QFY21, Emami delivered 10% YoY volume growth, 11% YoY revenue growth and 33% YoY EBITDA growth.
● In 2QFY21, excluding the winter portfolio which had a weak quarter, the revenue growth was 28% YoY.
● The growth was seen across all brands, channels and geographies. Kesh King had highest ever quarterly growth, healthcare sector delivered 50%+ YoY growth in 2QFY21.
● Now winter is setting in and management expects 2HFY21 to be better. Trajectory in October 2020 was good and all brands are performing well.
● Healthcare segment, which includes chyawanprash and other immunity boosters, growth was 40% in 1QFY21 and 53% in 2QFY21.
● There is no extra inventory with the dealers now and the supply chain has settled well from the interim covid-19 disruption. So growth would continue.
● In line with the FMCG industry, Emami’s advertising expenses have now returned to pre-covid levels.
● Management expects EBITDA margin to expand from 26% in FY20 to ~30% for FY21E.

Consensus Estimate (Source: market screener website)
● The closing price of EMAMILTD was ₹ 380/- as of 10-November-2020. It traded at 38x/ 31x/ 26x the consensus EPS estimate of ₹ 10.1/12.1/14.5 for FY21E/ FY22E/ FY23E respectively.
● The consensus target price of ₹ 391/- implies a PE multiple of 27x on FY23E EPS of ₹14.5/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Emami, FMCG , , 0 Comments Read more...
03 Nov

Revenue growth across segments expected to continue– Laurus Labs

Update on the Indian Equity Market:

On Monday, Nifty closed 0.2% higher at 11,669. Within NIFTY50, INDUSINDBK (+6.5%), ICICIBANK (+6.0%), and AXISBANK (+6.0%) were the top gainers, while RELIANCE (-8.7%), DIVISLAB (-2.8%), and EICHERMOT (-2.5%) were the top losing stocks. Among the sectoral indices, PRIVATE BANK (+4.2%), BANK (+4.2%) and FINANCIAL SERVICES (+3.9%) were the top gainerswhileIT (-0.9%), PHARMA (-0.6%), and AUTO (-0.3%) were the top losing sectors.

Revenue growth across segments expected to continue– Laurus Labs

Excerpts of an interview with Mr. Satyanarayana Chava, Founder & CEO, Laurus Labs, aired on CNBC-TV19 on 30th October 2020:
● In 2QFY21, LAURUSLAB’s revenue growth came from all three divisions and management expects that trend to continue.
● Management has very good visibility of revenue growth going forward.
● Management also expects to maintaingross margins and EBITDA margin. The EBITDA margin is expected to be maintained within the 1HFY21 band of 29%-33%. However, Management refrained from giving any numerical guidance.
● LAURUSLAB’s net debt as of 30th September 2020 is Rs 20,000 mn. Management does not want to bring down the net debt beyond this level as there is a large capacity expansion plan on cards.
● Based on the revenue visibility and order book level, investment in additional capacity is required. Over the next 24 months, management expects a capital outlay of Rs 12,000 to 15,000 mn. The capacity expansion will be done using internal accruals and no external funds will be raised.
● LAURUSLABS has an annualized net debt to equity ratio of 0.85x so they are not highly leveraged. So,the decision to not reduce the net debt levels will not hurt the company.
● Recently the rules have been relaxed in the production linked incentives (PLI) scheme for Active Pharmaceutical Ingredients (APIs), drug intermediaries, and medical devices. LAURUSLABS has some products where they could get benefit from the modified norms of the PLI scheme, but it will not be very significant.

Consensus Estimate (Source: market screener website)
● The closing price of LAURUSLABS was ₹ 301/- as of 2-November-2020. It traded at 18.1x/ 20.6 x/ 13.1x the consensus EPS estimate of ₹ 16.6/14.6/22.9 for FY21E/ FY22E/ FY23E respectively.
● The consensus target price of ₹ 309/- implies a PE multiple of 13.5x on FY23E EPS of ₹22.9/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Laurus labs, Pharmaceuticals, Uncategorized , , 0 Comments Read more...
27 Oct

Prioritizing growth over margin expansion– Mphasis

Update on the Indian Equity Market:

On Monday, Nifty closed 1.4% lower at 11,768. Within NIFTY50, HDFCLIFE (+3.2%), NSETLEIND (+2.6%), and KOTAKBANK (+2.0%) were the only gainers, while HEROMOTOCO (-6.7%), BAJAJ-AUTO (-6.0%), and HINDALCO (-5.3%) were the top losing stocks. All the sectoral indices closed with losses led by METAL (-3.5%), AUTO (-3.2%), and MEDIA (-2.7%).

Prioritizing growth over margin expansion– Mphasis

Excerpts of an interview with Mr. Nitin Rakesh, MD & CEO, Mphasis, aired on CNBC-TV19 on 23rdOctober 2020:
● Mphasis delivered a strong growth in Direct Core segment in 2QFY21. The growth has been broad based and there are several drivers of this growth:
1. 2QFY21 was the 3rd consecutive quarter of $ 200mn+ net TCV deal wins. 2QFY21had highest ever TCV deal wins of $ 360mn. The momentum of deal wins is translating in good growth for the direct core channel.
2. Mphasis has seen good growth in existing strategic accounts as well as from new clients. Growth from new clients was 30% YoY in 2QFY21.
3. Mphasis has also been enjoying strong growth for the past 6 quarters from their European business. European business revenue growth was ~27%-28% YoY for 2QFY21.
● Mphasis has already crossed the pre-pandemic peak revenue in 2QFY21 itself. Mr Rakesh expects that the current growth trajectory should continue and Mphasis can deliver mid to high single digit revenue growth for FY21E.
● Mphasis’s MRC (Minimum Revenue Commitment) from strategic account of DXC expires in Sep-21. They still have $ 200 mn to be consumed in next 4 quarters. Post that, DXC channel will become like any other client for Mphasis and management is not worried about retaining the clients.
● Mphasis has stuck to their EBIT margin guidance band of 15.5%-16.5%. Management’s philosophy going into FY21 has been to maximize the growth potential in the market considering a lot of Mphasis’ digital capabilities are in high demand. Mphasis has prioritized growth over margin expansion, at the same time held margins steady.
● Mphasis istaking the margin operating efficiencies and re-investing it back into competency building, sales expansion, and investingin ramp up of recent deal wins.

Consensus Estimate (Source: market screener website)
● The closing price of MPHASIS was ₹ 1,356/- as of 26-October-2020. It traded at 20.7x/ 17.9x/ 15.8x the consensus EPS estimate of ₹ 65.6/75.8/85.7 for FY21E/ FY22E/ FY23E respectively.
● The consensus target price of ₹ 1,483/- implies a PE multiple of 17.3x on FY23E EPS of ₹85.7/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By IT, Mphasis , , , 0 Comments Read more...
16 Oct

5 focus areas to reinvigorate the company – Wipro

Update on the Indian Equity Market:

On Thursday, Nifty closed 2.4% lower at 11,680. Within NIFTY50, ASIANPAINT (+0.4%), JSWSTEEL (+0.2%), and COALINDIA (+0.1%) were the only gainers, while BAJFINANCE (-5.0%), TECHM (-4.4%), and ICICIBANK (-4.1%) were the top losing stocks. All the sectoral indices closed with losses led by BANK (-3.4%), PVT BANK (-3.3%), and FINANCIAL SERVICES (-2.9%).

5 focus areas to reinvigorate the company – Wipro

Excerpts of an interview with Mr. Thierry Delaporte, MD & CEO, Wipro, published in the Business Standard on 14th October 2020:
● Out of the impacted sectors, Wipro is now seeing a good volume of deals in the BFSI, retail, and consumer sectors. The manufacturing sector is still impacted by the pandemic. However, the need for transformation will lead to growth coming back in the next couple of quarters. The aerospace and automobile sectors are still under pressure.
● Clients have intent on reducing expenses. But in reality, spending on technology actually increases. Spending on technology is a business requirement now. Not just the CIO but also the chief marketing officer, chief of the supply chain, chief digital officer are all asking for technology. The reduction will be in terms of spending on legacy processes.
● Wipro is focusing on five main areas. They are-
1. Focus on large clients and large deals as opposed to going after new clients
2. Focus on more markets and sectors where Wipro can claim leadership
3. Refine offerings by creating more vertical differentiation
4. Invest in talent to acquire the best domain and technology expertise
5. Refine the operating model to drive simplicity and nimbleness
● In order to chase and win large deals, Wipro plans to enhance and reinforce the global client partners’ power so they can have a bigger impact on clients.
● Due to the pandemic, Wipro has now learned that employees can work from home productively. On the other hand, they also need to connect with the rest of the organization for the culture and sense of belonging. Mr. Delaporte is of the view that going forward there will be a hybrid model where employees will have more flexibility without any judgment on where they choose to work from.
Consensus Estimate (Source: market screener website)
● The closing price of WIPRO was ₹ 342/- as of 15-October-2020. It traded at 20.3x/ 19.0x/ 17.9x the consensus EPS estimate of ₹ 16.8/18.0/19.1 for FY21E/ FY22E/ FY23E respectively.
● The consensus target price of ₹ 283/- implies a PE multiple of 14.8x on FY23E EPS of ₹19.1/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By IT, Wipro , , 0 Comments Read more...
08 Oct

Expect double-digit growth in 3QFY21E– LIC Housing Finance

Update on the Indian Equity Market:

On Wednesday, Nifty closed with 0.7% gains at 11,739. Within NIFTY50, TITAN (+4.5%), BAJAJ-AUTO (+3.6%), and HEROMOTOCO (+2.9%) were the top gainers, while BAJFINANCE (-4.1%), BPCL (-2.8%), and HINDALCO (-2.7%) were the top losing stocks. Among the sectoral indices, AUTO (+1.4%), IT (+0.6%), and PVT BANK (+0.6%) were the top gainers while MEDIA (-2.5%), REALTY (-1.9%), and METAL (-1.5%) were the top losing sectors.

Expect double-digit growth in 3QFY21E– LIC Housing Finance

Excerpts of an interview with Mr. Siddhartha Mohanty, MD & CEO, LIC Housing Finance (LICHSGFIN), that aired on CNBCTV18 on 6th October 2020:
● Post the highly impacted months of April and May, LICHSGFIN experienced good growth in disbursements June onward. This growth has been particularly in the affordable segments. However, off late, Mr. Mohanty has also observed some uptick in demand in above mid-segment, as well as premium segment disbursements picked up since June.
● LICHSGFIN has almost reached pre-COVID levels in terms of disbursements owing to good traction in the month of September.
● Despite the inauspicious periods of ‘shraadh’ and ‘adhik maas’ in September, the 2QFY21 has been very good.
● Management expects the positive trend to continue and expect double-digit growth in 3QFY21E. Several factors are into play to motivate home buyers to purchase now. Government has given several incentives including the extension of PMAY CLSS scheme till March 2021, and reduction in stamp duty to 2% up to December 2020 by Maharashtra government. Apart from that, some developers are also giving concessions to attract customers.
● LICHSGFIN has also introduced innovative products to attract customers such as 6 EMI waivers for borrowers who are undertaking immediate purchase/ moving of the house.
● For LICHSGFIN, developer loan book is less than 7% of the total book. Considering sales velocity, within the developer segment, LICHSGFIN focuses more on affordable housing. Even now, LICHSGFIN has been lending to developers but on a very limited basis.
● LICHSGFIN has also seen better than expected collections. A substantial portion of borrowers who were under moratorium have also started paying in September.
● Despite increased competition in home loans, LICHSGFIN has managed to sustain its market share and maintain stable margins.
Consensus Estimate (Source: market screener and investing.com websites)
● The closing price of LICHSGFIN was ₹ 283/- as of 07-October-2020. It traded at 0.7x/ 0.7x/ 0.6x the consensus Book Value per Share estimate of ₹ 386/428/472 for FY21E/ FY22E/ FY23E respectively.
● The consensus target price of ₹ 331/- implies a PB multiple of 0.7x on FY23E BVPS of ₹ 472/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Housing Finance, LIC Housing , , 0 Comments Read more...
28 Sep

All three companies- Finance, Life and General Insurance growing well– Bajaj Finserv

Update on the Indian Equity Market:

On Friday, Nifty closed with 2.3% gains at 11,050. Within NIFTY50, BAJAJFINSV (+6.6%), HCLTECH (+5.3%), and CIPLA (+5.1%) were the top gainers, while SBILIFE (-1.1%), BPCL (-0.9%), and UPL (-0.6%) were the only losing stocks. All the sectoral indices ended positive withIT (+3.5%), MEDIA (+3.4%), and AUTO (+3.4%) gaining the most.

All three companies- Finance, Life and General Insurance growing well– Bajaj Finserv

Excerpts of an interview with Mr. Sanjiv Bajaj, Chairman and MD, Bajaj Finserv (BAJAJFINSV), published on ETBFSI website dated 23rdSeptember 2020:
• Seven or eight years ago, the life insurance company (BALIC) and general insurance company (BAGIC) contributed to around 75-80% of Bajaj Finserv’s consolidated profits. BALIC contributed the largest, followed byBAGIC, and the least contribution came from Bajaj Finance.
• This has changed significantly since then. Today, Bajaj Finance is the largest contributor to consolidated profitability, followed by BAGIC and BALIC respectively.
• Bajaj Finserv owns 74% of the two insurance companies and a little under 52% of the finance company. So the proportion of the profit pick up ends up being different.
• All three engines are growing well so the shareholders get a diversified mix of profits from these companies.
• Companies under the Bajaj Finserv umbrella have become even more digital than before. Management has plans for the businesses to come out stronger, better and to provide a set of solutions for customers keeping in mind lessons learnt in this crisis is what the customers need.
1. Bajaj Allianz Life Insurance (BALIC)
• Life insurance is a peculiar business in the sense that when it is growing fast, the business burns more cash upfront in the form of commissions and expenses. But the company earns premium over a period of time and makes profits in later years. On the other hand, through slow growth years, the opposite happens and the profit goes up.
• Post the difficult lockdown phase, BALIC’s premium collections have come back to 80-85% of pre-COVID levels.
• The two insurance businesses are distributed very well through the country. As a result the recovery is quite good because recovery outside of the top 10, 20 cities has been very strong.
2. Bajaj Allianz General Insurance (BAGIC)
• Bajaj’s market share within general insurance companies is between 6.5% and 7%. Bajaj runs a diversified set of business lines, and most of these lines have market shares which are more or less around the 6.5%-7%`range.
• The market share also varies year on year based on changing competition and market opportunities.
• Bajaj may not be the cheapest policy issuer but is quick, fair, and transparent not only in policy issuances but also in claim handling.
• In the case of crop insurance, it is about 6.5-7% of Bajaj’s mix of the overall industry’s share. There are two main seasons -kharif and rabi –and the share of this business line in Bajaj’s business depends on what the dynamic is in that season. But it normally evens out over a year.
• In terms of uptick in motor insurance, the picture is still not very clear. There is growth due to pent-up demand and further growth is expected due to the upcoming festive season. But what will happen post that towards end of FY21E is unclear.
• The demand is still interwoven with the impact of the pandemic on local lives. Bajaj saw good growth in June. But July and part of August were terrible because of local lockdowns.
3. Bajaj Finance
• Due to the local lockdowns in the last few months, the business in top 20 cities got severely impacted.
• Bajaj Finance got impacted more compared to BAGIC and BALIC as it has a large percentage of business coming from the top 20 cities. But things have been getting better from August.
• Over two-thirds of the borrowers, who took the moratorium, had never bounced with Bajaj Finance earlier. That means they were conserving liquidity.
• Almost 30% of the book took a moratorium in the first couple of months. It came down to the low teens in the last two months. As people got more confident and as the cities and businesses started opening up, they started paying as well and that is a very good sign.
• Even though things are moving in the right direction, the situation is still unpredictable. Bajaj Finance continues to be extra conservative, has stocked up on liquidity and continues to make additional provisions.
• Bajaj Finance also remains conservative in incremental lending and will go back to growth when things start to improve.

Consensus Estimate (Source: market screener and investing.com websites)
• The closing price of BAJAJFINSV was ₹ 5,784/- as of 25-September-2020. It traded at 2.6x/ 2.3x/ 2.0x the consensus BVPS estimate of ₹ 2,188/2,478/ 2,873 for FY21E/ FY22E/ FY23E respectively.
• The consensus target price of ₹ 7,248/- implies a PB multiple of 2.5x on FY23E BVPS of ₹ 2,873/-.

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

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